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With expansion on its mind, Future Group seems all set to give its competitors a tough time ahead!

The curtains close, the actors retire & the audience thunderously applaud the last act of G.B. Shaw’s ‘Pygmalion’. And amidst the mesmerizing thunder, one gets reminded of someone who’s scripting a similar plot. And wait! We are not hinting at an imposter here, but at the retail maverick Kishore Biyani, who, like the lead figure in the play seems to have taken a bet to satisfyingly pass off a common girl as a refined society lady!

Biyani’s plan to enter the last mile retail space with announcement of 1,500 new format ‘Fair Price Shops’ is clearly an effort to convert the humdrum and highly uninspiring ‘kirana shops’ into prom queen material. And surely, while competitors thought that this retail bigwig only moved ahead with the refined crowd, he springs a surprise, disclosing desires for plain Jane as well. Since inception, Biyani’s Future Group diverted its attention from the bottom of the pyramid... Now no more!

A bigger question here is to what extent was the adoption of his current strategy affected by Subhiksha’s & Reliance Fresh’s effortless walk towards increasing market share. Or was it just skyrocketing real estate prices at prime locations that made Biyani believe profoundly in the fragmented set-up? Sure enough, competition from other retail players may also have edged him to maximise his national reach through his latest arm candy (read Fair Price Shops) which measure only 2,000 square feet each with glitz whatsoever! But Nilotpal Chakravarti, Retail Analyst, Springboard Research, denies the fact as, “The new format stores are nothing but an attempt to tap the large lower middle-class group in small areas, where there is a great potential for organised retail. The step is not meant as a response to Subhiksha or Reliance Fresh, but is a means to tap the huge market that exists...” Sure, with a difficult living ahead & with the retail wave gaining magnitude – with Subhiksha planning to touch 1,000 mobile stores by 2007 end & Reliance Fresh expecting to add another 100 stores soon to add to the innovative growth it has shown with its first hypermart already launched in Ahmedabad – Biyani seems to have understood the need for attending to the bottom of the pyramid while still donning the organised player hat! Moreover, the Future Group is poised to unveil four new brands by 2007-end. Besides, Damodar Mall, President (Food Business Division), Pantaloon Retail India Ltd. Confirms, “Most of Future Group’s ventures are company owned but we are trying the franchisee route too with these stores.”

Thus, Biyani will have make careful choices as profit margins at the bottom of the pyramid are thinner. Also, while HLL and ITC have already started serving the lower income brackets, they are also giving the rural Indians the purchasing power through their CSR acts. Moreover the prime competitors (including Reliance Fresh) can play the game much harder owing to their deep pockets. So will his ‘Fair Price’ Janes enable the company to win the prom title amidst the glitzy ladies? Well, surely not if he acts sans break-even targets for starters!
B&E research: Priyanka Rajpal

For Complete IIPM Article, Click on IIPM Article

Source : IIPM Editorial, 2007

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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